Even so, about half of U.S. retail investors trade at least once per month, according to State Street. Frequent trading can leave investors susceptible to costly landmines. To safely allocate a small portion of a diversified portfolio to stock trading, you’ll want to avoid the most common pitfalls.

1. High commissions

If you’re just dabbling in the market, consider using Robinhood, which offers commission-free trading for a large selection of U.S. stocks and ETFs. One drawback: The company currently supports only taxable brokerage accounts. Retirement investors should fully fund a 401(k) and an IRA before contributing to a taxable account.

If you’re trading more seriously, consider your needs, then select the lowest-cost brokerage that meets them. In general, you’ll pay more for an online broker that offers a premium trading platform and top-tier research and tools, such as TD Ameritrade, which charges $9.99 per stock or ETF trade. If you don’t need or want those features, a discount broker such as OptionsHouse or TradeKing, both of which charge only $4.95 per trade, might suit your needs.

2. Emotional reactions

Many experts advise separating emotions from investment decisions, one reason whydollar-cost averaging is a good strategy for many long-term investors. But research shows that even seasoned traders make emotional decisions.

The best way to keep your emotions in check is to make a plan and stick to it: Decide how much you want to invest, how much you’re willing to lose, and at what price you’ll get in and out.

Setting such a strategy can help you avoid chasing hot stocks. A rapid rise can mean other investors are moving out, and you risk buying at a premium before the stock falls.

3. Incorrect order entry

When it comes to trading, you can’t play the game unless you understand the lingo — and there’s a lot of lingo. If you don’t understand, you might place the wrong kind of trade.

The default option is a market order, which places a trade — to buy or sell — for the best price available. In most cases, though, it would be better to cap risk by using stop-loss orders and stop-limit orders, which set the prices at which you want to buy or sell a stock, then trigger orders when the stock hits that price.

Before you dive in, take advantage of free investor education resources. If you’re confused during the order process, reach out to a customer service representative at your online broker; many are registered investment advisors or former traders. (If you have the order placed for you, beware of broker-assisted trade fees).

The bottom line

Most investors do best with a diversified portfolio of low-cost index funds and little to no trading of individual stocks. But dabbling in the stock market with a small percentage of your investable assets can be fun and — in some cases — lucrative, provided you understand the risks involved, minimize commissions and plan to invest for the long term.

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